Comprehensive Technical and Software Due Diligence Cases
The advantage of asking the right questions in software due diligence’s
- Software. Due Dilience, Business Model
- 2 PE Firms, 1 M&A, 2 SME acquisition cases and multiple VC due diligences (undisclosed)
- Since 2017
- Europe, Switzerland
Challenge
Conducting due diligence for software firms can be quite daunting. Technical and software due diligence specifically will lead to:
1. Technological Maze: The complexity of the technology, with its intricate architecture and potential hidden flaws, can be challenging to navigate. Missing a critical issue could have serious consequences.
2. Intellectual Property Risks: The possibility of IP disputes is a significant concern. Overlooking an infringement could lead to expensive legal battles and jeopardize the deal.
3. Cybersecurity Threats: The risk of cyberattacks is ever-present. Any weakness in the firm’s defenses could result in damaging data breaches and loss of sensitive information.
4. Regulatory Hurdles: Ensuring compliance with various regulations, such as data protection laws like GDPR. can be complex. Non-compliance can lead to substantial fines and damage to the firm’s reputation.
5. Financial Uncertainty: Evaluating the financial health of the firm is critical. Misjudging revenue models or overlooking deferred revenue can lead to financial instability.
6. Customer Retention Issues: High chum rates can significandy impact the firm’s value. Losing customers rapidly can be a major red flag.
7. Talent Risks: The potential loss of key personnel is a concern. Losing critical employees can disrupt the firm’s operations and innovation.
8. Integration Challenges: If part of a merger or acquisition, integrating the software firm’s products and culture with the acquiring company can be difficult. Misalignment can lead to significant challenges.
These challenges require careful consideration and a thorough approach to ensure a successful evaluation.
Solution
At. Sensaco, we offer extensive services in technical and software due diligence projects, covering all aspects of product design, including hardware and software. Our expertise is often utilized within larger consortia to provide specialized technical knowledge. Our past projects span a wide range of industries, demonstrating our versatility and depth of experience.
Depending on the project scope and lead we focus on our technical roles. However, in smaller VC-projects, for example with business angel groups such as SICTIC, we may lead a consortium as well.
Industries and Projects
Our technical and software due diligence services have supported projects in various fields, including:
– Artificial Intelligence (AI): Cloud software, marketing, and sales solutions for corporate users.
– Innovation Software: Crowd sourcing and employee communications (HR tech).
– Medical and Pharmaceutical Software: Lab automation and DNA databases.
– Lab Equipment: Focus on electronics and material technology.
– Laboratory Information Management Systems (LIMS).
– Biometrics in physical access control systems.
– Fintech Software: Used in regulated fields and audits.
– Online Media: Newspapers and digital platforms.
– Hardware, Computer Vision, and Robotics: For media and event solutions.
Furthermore, our consultants bring hands-on experience for specific products:
– Semiconductors and Photonics Devices.
– MEMS Sensors, CMOS, and Micromachining.
– Micro-Mechanical Sensors: With laser production.
– Logistics Solutions: IoT sensor networks.
– Industrial Quality Control: Using computer vision.
– Industrial Drives.
– Food Tech: Utilizing computer vision.
– Surgery simulations with physical modelling.
Results
Conducting due diligence on software companies or industrial forms with software-realted products offers several key benefits:
1. Risk Identification and Management: It helps identify and manage potential risks, ensuring that any issues are addressed before proceeding; red flags in software due diligence include lifecycle issues, architectural limitations, or complex integrations
2. Informed Decision-Making: Provides a detailed understanding of the business or transaction, allowing for informed decisions
3. Better Negotiation Outcomes: With a clear understanding of the value and risks involved, parties can negotiate better deals; often software looks like magic but behind the scenes it is standard or even outdated
Fit Assessment: Allows you to determine if the target company is the right fit for your business; e.g. in a software asset deal you need to be able to integrate and maintain what you buy.
Checklists for due diligence: based on past projects we maintain checklists for software due diligence.
